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The World
Brazil’s newly elected president Luiz Inácio Lula da Silva has moved to sweep away the legacy of his predecessor Jair Bolsonaro by tightening gun controls and curbing gold mining in the Amazon rainforest. The leftwing president revoked a decree that made it easier to buy guns and a decree that allowed for “artisanal” gold mining on indigenous land. He also ordered his ministers to end studies on the viability of privatizing energy group Petrobras and the national post service Correios, and revoked an eleventh-hour decree from the Bolsonaro administration that gave a tax break to large companies. He reiterated promises to abandon the country’s constitutionally mandated cap on public spending, which he called a “stupidity”. (Financial Times)
A Chinese military drone flew near Japanese islands, prompting Tokyo to scramble fighter jets. The unmanned aerial vehicle, thought to be a WZ-7 Soaring Dragon, circled past Okinawa and Miyakojima. The PLA drone operations likely were a response to Tokyo’s new defense strategy and closer ties with Washington, observers say. (South China Morning Post)
North Korea sacked its No. 2 military leader, Pak Jong-chon, the most powerful figure in the regime after Kim Jong-un, according to state media. During a plenary meeting of the Workers’ Party of Korea,“Pak Jong-chon was recalled and Ri Yong-gil was by-elected as vice-chairman of the WPK Central Military Commission.” Ri also took over Pak’s job as secretary of the party’s central committee. The Central Military Commission is regarded as North Korea’s highest military authority. (The Times)
A top Chinese public-health official warned of widespread Covid-19 outbreaks across the country’s more vulnerable rural areas as millions of citizens prepare to travel home for the coming Lunar New Year holiday. (Wall Street Journal)
Up to 200,000 people may be infected with Covid-19 in Hong Kong each day, researchers have found, but experts say while the estimate may be far higher than official figures the risks will still be manageable when the city’s border with mainland China reopens. (South China Morning Post)
Xi Warns of Tough Covid Fight, Acknowledges Divisions in China. (Bloomberg)
The Japanese government will in fiscal 2023 increase its financial support for child-rearing families who move out of the Tokyo metropolitan area, providing up to 1 million yen ($7,500) per child, an increase from the current 300,000 yen. Launched in fiscal 2019, the incentive program is aimed at encouraging people raising children to move to areas with declining birthrates and aging populations. (Nikkei Asia Review)
U.S. News & World Report is revamping some elements of its law-school ranking, capitulating to pressure after deans at more than a dozen top law schools publicly challenged the value of the closely followed list. In a letter sent Monday to deans of the 188 law schools it currently ranks, U.S. News said it would give less weight in its next release to reputational surveys completed by deans, faculty, lawyers and judges and won’t take into account per-student expenditures that favor the wealthiest schools. The new ranking also will count graduates with school-funded public-interest legal fellowships or who go on to additional graduate programs the same as they would other employed graduates. (Wall Street Journal)
Economy
Big banks are predicting that an economic downturn is fast approaching. More than two-thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve are betting the U.S. will have a recession in 2023. Two others are predicting a recession in 2024. The firms, known as primary dealers, are a collection of trading firms and investment banks that include companies such as Barclays PLC, Bank of America Corp., TD Securities and UBS Group AG. They cite a number of red flags: Americans are spending down their pandemic savings. The housing market is in decline, and banks are tightening their lending standards. (Wall Street Journal)
Workers who stay put in their jobs are getting their heftiest pay raises in decades, a factor putting pressure on inflation. Wages for workers who stayed at their jobs were up 5.5% in November from a year earlier, averaged over 12 months, according to the Federal Reserve Bank of Atlanta. That was up from 3.7% annual growth in January 2022 and the highest increase in 25 years of record-keeping. (Wall Street Journal)
Darkest days likely over for euro zone factories: The downturn in euro zone manufacturing activity has likely passed its trough as supply chains begin to recover and inflationary pressures ease, leading to a rebound in optimism among factory managers. S&P Global's final manufacturing Purchasing Managers' Index bounced to 47.8 in December from November's 47.1, still below the 50 mark separating growth from contraction. (Reuters)
Final 2022 deal data: M&A activity was strong by historical standards, but a far cry from the record-setting heat of 2021. Global deal value and volume were down 38% and 18%, respectively, from 2021. The declines for U.S. deals were 39% and 15%. Q4 was the year's slowest quarter, after having been the busiest in 2021 and 2020. The top three industry sectors remained software, oil/gas and transportation/infrastructure. (Pro Rata)
Commodities trading boom raises fear of big losses among retail investors: Experts warn of market volatility as trading volumes of gold, oil, silver and copper have surged. Trading volumes in Invesco’s $6bn PDBC ETF — the largest broad-based commodities fund which is popular with retail investors — jumped more than 60 per cent and were almost three times as high as in 2020. Volumes across its broader suite of commodities funds climbed 50 per cent. (Financial Times)
AmEx Hooked Big Spenders and Regained the Throne With a Pricier Platinum Card: It boosted points and added new benefits, then raised fees in the middle of a pandemic. The risky strategy worked. (Bloomberg)
Back-to-Back Down Years Are Rare for the Stock Market: the S&P 500 has only seen consecutive years of negative returns three times since 1957, in 1973/1974 and in 2001/2002/2003 with returns getting worse in the second (and third) down year on each of those occasions. Since 1957, the S&P 500 has ended the year in the red 18 times including 2022. On 14 occasions, the index returned to growth the next year. (Statista)
Technology
China's tech supply chain is heading into the new year facing the twin challenges of slumping demand and staffing chaos caused by Beijing's abrupt U-turn on COVID controls. In a sign of the gloomy outlook for consumer electronics, Apple has notified several suppliers to build fewer components for AirPods, the Apple Watch and MacBooks for the first quarter, citing weakening demand, according to Nikkei Asia's supply chain checks with several component suppliers. (Nikkei Asia Review)
Tesla reported record production and deliveries for fourth-quarter electric vehicle deliveries but fell short of Wall Street estimates, burdened by lingering logistics problems and slowing demand amid rising interest rates and recession fears. The world's most valuable automaker delivered 405,278 vehicles in 4Q22, below Wall Street expectations of 431,117 vehicles. (Nikkei Asia Review)
Tesla in pole position in Norway's race to EV goal: China is by far the biggest car market overall but Norway, with its 5.5 million inhabitants, has achieved the world's highest proportion of electric vehicles with the help of generous subsidies. Some 79% of cars sold in Norway in 2022 were fully electric, as Norway aims to end petrol and diesel car sales by 2025. (Reuters)
Why EVs won’t replace hybrid cars anytime soon: The end could be coming soon for cars as we know them. If we’re going to limit global warming to 1.5 °C by 2050, as set out in the 2015 international Paris climate agreement, gas-powered vehicles will need to be largely off the road by then. But while some carmakers including GM and Volvo have enthusiastically embraced an all-electric future, others are continuing to release hybrid vehicles. Toyota, the world’s largest automaker, plans to keep selling hydrogen-fuel-cell vehicles, declaring the US target of making EVs reach half of new car sales by 2030 a “tough ask.” Although sales of electric vehicles have grown quickly over the past few years, the problem lies in easing US consumers’ fears around EV charging and range—the same concerns that have made them more receptive to plug-in hybrids. (MIT Technology Review)
Businesses will soon be expected to show real progress on climate pledges: A year after COP26, the number of FTSE 100 companies vowing to achieve net zero emissions by 2050 grew by 37 percent to 82 percent. Among the pledgers were some of the world’s biggest companies: Amazon, Apple, Ford, IBM, JP Morgan, Mars, and many others. But climate action is not just on the minds of industry giants: it’s a growing concern for every business as scrutiny grows. Making a pledge is the easy part. In 2023, we will see businesses held to account for what they actually deliver. Organizations will be forced to show that the commitments they’ve made are meaningful, providing transparent and ongoing proof that they are taking necessary actions to reduce their carbon emissions. Growing skepticism of over-ambitious, opaque, and even fraudulent climate pledges is turning up the heat on businesses. (Wired UK)
Shopify is seeking to fill a lucrative gap in marketing data left by Apple’s privacy crackdown by offering retailers a new way to target potential customers through the world’s largest ad platforms. The new tool allows retailers to pool their customer data and upload it to Meta and Google’s advertising platforms. Marketers are then able to target ads at “lookalike” customers who might be more likely to buy their products because they bought similar items from another retailer. The system is designed to skirt Apple’s rules against tracking iPhone users. (Financial Times)
What’s next in space in 2023: We’re going back to the moon—again—in 2023. Multiple uncrewed landings are planned for the next 12 months, spurred on by a renewed effort in the US to return humans to the lunar surface later this decade. Both private space companies and national agencies are set to make the 240,000-mile trek to our celestial neighbor, where they will test landing capabilities, look for usable water ice, and more. That’s not all 2023 has in store. We’re also likely to see significant strides made in private human spaceflight, including the first-ever commercial spacewalk, compelling missions heading out into—or back from—other solar system destinations, and new rockets set to take flight. Here’s what the next year has lined up for space. (MIT Technology Review)
Live Event
Today, 12 pm ET: Eurasia Group’s Biggest Global Threats 2023: an annual Eurasia Group report forecasting the political risks most likely to play out and how they could impact governments, the private sector, and the world. (GZERO Media)
Smart Links
Fidelity slashed its carrying value of Twitter by 56% during the first month of Elon Musk's ownership. (Axios)
Outdoor Retailer Patagonia Tests Solar Windows. (Wall Street Journal)
UC strike energizes unprecedented national surge of union organizing by academic workers. (Los Angeles Times)
New U.S. Citizens Hit a 15-Year High. (New York Times)